Thousands of retired civil servants continue to face delays in accessing their pension dues, even as Kenya’s pension bill hit a record Sh207.19 billion in the financial year ending June 2025 — a staggering 39 per cent increase from the previous year’s Sh148.9 billion.
The rising pension obligations have emerged as a major fiscal headache for the National Treasury, with payouts surpassing the Sh200 billion mark for the first time in history, amid growing demands for debt repayment and public wage obligations.
According to Treasury data, pension and gratuity payouts accounted for 92.8 per cent of the Sh223.14 billion allocated to pension liabilities that year. This increase has brought into sharp focus the sustainability of Kenya’s public spending, especially under the Consolidated Fund Services (CFS).
“There have been challenges when pensioners leave employment and wait for too long to get their payment, mainly because of system challenges. There are also other issues behind the delayed payment of pension,” Treasury Cabinet Secretary John Mbadi admitted recently.
Despite this record spending, the Treasury failed to disburse Sh23 billion in pension obligations during the year ending June 2024, exacerbating the plight of many aging retirees dependent on the funds for survival.
Soaring Pension Costs vs Delayed Payments
The number of pensioners currently stands at over 260,000, and projections suggest this figure will balloon even further. At least 85,000 public servants are expected to retire between last year and June 2026 upon hitting the mandatory retirement age of 60.
This surge has turned the pension bill into one of the fastest-growing components of CFS — joining public debt repayments and constitutional office holders’ salaries. In FY2024/25, pensions consumed 11.6 per cent of all CFS disbursements, up from 8.4 per cent the previous year.
The cumulative growth is stark: Kenya’s pension budget has grown by 87.8 per cent in just four years, from Sh110.36 billion in FY2020/21 to Sh207.19 billion in FY2024/25.
Debt Still Dominates the Budget
Despite the pension strain, public debt repayments continue to dwarf all other budget items, taking up 87.1 per cent of the Sh1.79 trillion CFS budget in FY2024/25. This is only a slight dip from 90.3 per cent in the previous financial year.
The clash between debt obligations and pension needs is creating a tightening fiscal environment, with the government forced to make tough choices between servicing external loans, paying retirees, and maintaining basic service delivery.
Treasury Rejects Inflation-Pegging Bill
In light of the soaring cost of living, a proposal to peg pensions to inflation was floated in Parliament. However, the Treasury rejected the legislation, warning it would place unsustainable pressure on an already strained budget.
Instead, the government has proposed a limited cost-of-living adjustment specifically for retired judges, a move seen as a compromise to balance fairness and fiscal restraint.
The Road Ahead
As Kenya grapples with growing retiree numbers, systemic payment delays, and ballooning debt obligations, the pension crisis is becoming one of the most pressing fiscal challenges for the Ruto administration.
With retiree welfare hanging in the balance, economic analysts and labour unions are now calling for urgent reforms in pension administration, automation, and debt restructuring to free up cash flows and protect the dignity of retired public servants.
